Uruguay Properties

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Good times ahead for Uruguayan farmers

Good times ahead for Uruguayan farmers It looks like being a good year for Union Agriculture Group. While the name may not ring too many bells internationally, the Uruguayan agricultural powerhouse is one of the country’s top landowners, with sales posed to more than triple this year. The company had planned to become the first Uruguayan group to list in New York, but had to scrub its $287.5m IPO in 2011 because of poor market conditions. However, it has now raised $110m to fund its development plans, and is positioning itself as a key company for investors in an attractive sector in Latin America: farming. In agriculture, Uruguay is already an interesting prospect – it has overtaken Argentina as a beef exporter and high commodities prices have encouraged foreign investors including El Tejar, the Argentine-based company that is the world’s biggest farm group, and George Soros’ Adecoagro, to invest in the politically stable country. Farmers will also be celebrating a court ruling that scraps a planned tax on large land holdings (unless the government seeks to slap on some other levy to raise the money earmarked for rural development instead). As well as soya and corn, Uruguay has made great strides as a rice producer – good news for UAG, which owns and operates more than 90,000 hectares and manages 15,000 more for third parties, growing soybeans, wheat and rice, raising cattle and sheep, and producing dairy goods, blueberries and honey. Furthermore, this year’s harvests in Uruguay are expected to be good, though whether they will beat records depends on how much dry conditions will have impacted, and that won’t be fully known for a couple of months. Privately-held UAG, which has grown from a 6,000-hectare operation in 2008 to nearly 16 times that size today and expects to turn its first profit in the year to June 2013, plans to plough $110m into land payments. It added 40,000 hectares of land last year, helping rack up a loss of $12.1m in the year to June 2012, and UAG says it takes three years to integrate new land before it can become productive. Mind you, sales in the year to June 2013 are expected to have more than tripled, to some $100m (they were $31m in 2012 and $12.1m in 2011). UAG clearly thinks big. According to Juan Sartori, the group’s chairman, in a statement: We believe fundamentals for the agricultural sector will remain attractive over the long run given the finite stock of farmland available to meet growing demand for agricultural commodities. Completing this equity raising, particularly in current market conditions, is a real testament to the investment case for Latin American agriculture and our company’s expertise in this field. And Uruguay – a country where Oscar Costa, one of UAG’s directors, remembers ploughing with oxen when he was growing up “because there was no other way of doing it” – is well placed to grow and capitalise on competitive advantages vis-à-vis its larger neighbour and agricultural powerhouse, Argentina. Could be a good year for UAG all round, then.

Source: Financial Times - 20/02/2013


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